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Ramón Gómez-Salvador

21 September 2021
OCCASIONAL PAPER SERIES - No. 275
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Abstract
This report discusses the role of the European Union’s full employment objective in the conduct of the ECB’s monetary policy. It first reviews a range of indicators of full employment, highlights the heterogeneity of labour market outcomes within different groups in the population and across countries, and documents the flatness of the Phillips curve in the euro area. In this context, it is stressed that labour market structures and trend labour market outcomes are primarily determined by national economic policies. The report then recalls that, in many circumstances, inflation and employment move together and pursuing price stability is conducive to supporting employment. However, in response to economic shocks that give rise to a temporary trade-off between employment and inflation stabilisation, the ECB’s medium-term orientation in pursuing price stability is shown to provide flexibility to contribute to the achievement of the EU’s full employment objective. Regarding the conduct of monetary policy in a low interest rate environment, model-based simulations suggest that history-dependent policy approaches − which have been proposed to overcome lasting shortfalls of inflation due to the effective lower bound on nominal interest rates by a more persistent policy response to disinflationary shocks − can help to bring employment closer to full employment, even though their effectiveness depends on the strength of the postulated expectations channels. Finally, the importance of employment income and wealth inequality in the transmission of monetary policy strengthens the case for more persistent or forceful easing policies (in pursuit of price stability) when interest rates are constrained by their lower bound.
JEL Code
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
25 March 2021
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 2, 2021
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Abstract
This box compares the economic performance of the euro area and the United States during 2020. While it is not yet possible to assess the long-term impact of the coronavirus (COVID-19) pandemic, it is interesting to take stock of the economic developments that have led to the worst loss in output in either region since the Second World War. Primarily as a result of the stricter pandemic-related lockdowns in the euro area, total GDP losses for 2020 somewhat exceeded those in the United States. Nevertheless, the pattern in private consumption was similar in both economies despite the considerably larger fiscal transfers provided in response to the crisis in the United States. Job retention schemes, which cushioned the significant adverse impact of the crisis on employment, and other direct transfers to firms and households have been key elements of the euro area’s fiscal support. Inflation was more subdued in the euro area, partly on account of special factors like the temporary reduction in German VAT.
JEL Code
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
J82 : Labor and Demographic Economics→Labor Standards: National and International→Labor Force Composition
21 August 2019
WORKING PAPER SERIES - No. 2310
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Abstract
We present non-linear models to capture the turning points in global economic activity as well as in advanced and emerging economies from 1980 to 2017. We first estimate Markov Switching models within a univariate framework. These models support the relevance of three business cycle regimes (recessions, low growth and high growth) for economic activity at the global level and in advanced and emerging economies. In a second part, we find that the regimes of the Markov Switching models can be well explained with activity, survey and commodity price variables within a discrete choice framework, specifically multinomial logit models, therefore reinforcing the economic interpretation of the regimes.
JEL Code
C34 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Truncated and Censored Models, Switching Regression Models
C35 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Discrete Regression and Qualitative Choice Models, Discrete Regressors, Proportions
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
21 March 2019
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 2, 2019
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Abstract
This box looks at the current phase of the business cycle in major non-euro area advanced economies with a view to assessing the factors behind the transition to weaker growth.It shows that in several key advanced economies the output gap is currently in positive territory, with activity still expanding faster than potential. Although growth in non-euro area advanced economies has been slowing, signals of a severe slowdown or recession appear contained. This notwithstanding, downside risks abound and have increased lately.
JEL Code
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
31 October 2012
OCCASIONAL PAPER SERIES - No. 138
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Abstract
Between the start of the economic and financial crisis in 2008, and early 2010, almost four million jobs were lost in the euro area. Employment began to rise again in the first half of 2011, but declined once more at the end of that year and remains at around three million workers below the pre-crisis level. However, in comparison with the severity of the fall in GDP, employment adjustment has been relatively muted at the aggregate euro area level, mostly due to significant labour hoarding in several euro area countries. While the crisis has, so far, had a more limited or shorter-lived impact in some euro area countries, in others dramatic changes in employment and unemployment rates have been observed and, indeed, more recent data tend to show the effects of a re-intensification of the crisis. The main objectives of this report are: (a) to understand the notable heterogeneity in the adjustment observed across euro area labour markets, ascertaining the role of the various shocks, labour market institutions and policy responses in shaping countries
JEL Code
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
F15 : International Economics→Trade→Economic Integration
F33 : International Economics→International Finance→International Monetary Arrangements and Institutions
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
8 April 2011
OCCASIONAL PAPER SERIES - No. 125
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Abstract
This paper uses micro data from the European Union Statistics on Income and Living Conditions (EU-SILC) to generate structural information for the euro area on the incidence of household indebtedness and the debt service burden. It breaks down incidence by characteristics such as income, age and employment status, all features that can be cross-referenced in the light of theories such as the life-cycle hypothesis. Overall, income appears to be the dominant feature determining the debt status of a household. The paper also examines the evolution of indebtedness and debt service burdens over time and compares the situation in the euro area with that in the United States. In general, the results suggest that the macroeconomic implications of indebtedness for monetary transmission and financial stability are not associated with the mean but with the tails of the distribution.
JEL Code
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
11 May 2009
WORKING PAPER SERIES - No. 1049
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Abstract
We use a cohort based model to analyse determinants of labour force participation for disaggregated groups of workers in the euro area and the five largest euro area countries. The model captures age and cohort effects as indicators of (unobserved) determinants of participation behaviour. We use these effects and observed determinants to construct trends and projections of labour supply. Our results suggest that age and cohort effects can account for a substantial part of the recent increase in participation. Cohort effects are particularly relevant for women with those born in the late 1960s and early 1970s more likely to participate over the life-cycle. There is substantial variation in the estimated age and cohort effects across countries. Looking forward, positive cohort effects for women are not large enough to compensate for the downward impact of population ageing on participation rates in the euro area.
JEL Code
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
J21 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Force and Employment, Size, and Structure
31 March 2009
OCCASIONAL PAPER SERIES - No. 101
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Abstract
This report analyses the main developments in housing finance in the euro area in the decade, covering the period from 1999 to 2007. It looks at mortgage indebtedness, various characteristics of loans for house purchase, the funding of such loans and the spreads between the interest rates on loans granted by banks and the interest rates banks had to pay on their funding, or the return they made on alternative investments. In addition, the report contains a comparison of key aspects of housing finance in the euro area with those in the United Kingdom and the United States. At the end, the report briefly discusses aspects of the transmission of monetary policy to the economy.
JEL Code
D14 : Microeconomics→Household Behavior and Family Economics→Household Saving; Personal Finance
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
R21 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Household Analysis→Housing Demand
Network
Eurosystem Monetary Transmission Network
9 January 2009
OCCASIONAL PAPER SERIES - No. 100
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Abstract
The first part of this paper provides a brief survey of the recent literature that employs survey data on household finance and consumption. Given the breadth of the topic, it focuses on issues that are particularly relevant for policy, namely: i) wealth effects on consumption, ii) housing prices and household indebtedness, iii) retirement income, consumption and pension reforms, iv) access to credit and credit constraints, v) financial innovation, consumption smoothing and portfolio selection and vi) wealth inequality. The second part uses concrete examples to summarise how results from such surveys feed into policy-making within the central banks that already conduct such surveys.
JEL Code
C42 : Mathematical and Quantitative Methods→Econometric and Statistical Methods: Special Topics→Survey Methods
D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis
D14 : Microeconomics→Household Behavior and Family Economics→Household Saving; Personal Finance
Network
Eurosystem Monetary Transmission Network
30 June 2008
WORKING PAPER SERIES - No. 914
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Abstract
The study aims at describing productivity growth in the manufacturing sector for a selected panel of five European countries using firm-level data. The paper explores the empirical regularities of firm productivity distribution across countries. In particular, we assess the degree of persistence of firm relative productivity and consider its effect on aggregate productivity improvements. Moreover, the paper analyses the impact of the competitive forces on aggregate productivity growth by disentangling the role of firm learning and market selection. Finally, we estimate the relationship between labour productivity growth and firm-specific factors such as size, age and capital intensity across countries. The paper uses annual account data over the period 1993-2003 from Amadeus dataset (Bureau van Dijk) for a balanced panel of manufacturing firms. In line with previous evidence, our analysis shows that firm relative productivity levels are both highly heterogeneous across firms and very persistent over time in all the countries in the sample. With reference to aggregate productivity growth, we find that both labour productivity and total factor productivity changes are mostly driven by firm learning, i.e. within-firm productivity improvements, in most European countries. Conversely, the reallocation of resources spurred by the competitive selection process is found to play a minor role in fostering aggregate productivity growth. Finally, in line with macroeconomic trends, gains in productivity seem to be associated with capital deepening, but also with employment losses.
JEL Code
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
L11 : Industrial Organization→Market Structure, Firm Strategy, and Market Performance→Production, Pricing, and Market Structure, Size Distribution of Firms
L60 : Industrial Organization→Industry Studies: Manufacturing→General
30 June 2008
OCCASIONAL PAPER SERIES - No. 89
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Abstract
The paper starts by presenting some stylised facts on youth unemployment over the last two decades, both at the euro area and the country level. It shows that despite declining considerably over the last few years, youth unemployment has remained at a high level relative to other age groups in most euro area countries. The paper finds that there is a positive relationship between the share of young people in the total population and the youth unemployment rate, i.e. the smaller the share of young people in the population, the lower the risk of them being unemployed. At the same time, economic conditions are negatively correlated with the youth unemployment rate, i.e. the youth unemployment rate increases when the economic situation worsens. Moreover, robust results across the regression scenarios show that higher employment protection and minimum wages imply a higher youth unemployment rate, while active labour market policies (ALMPs) tend to reduce it. The results also indicate that the increasing share of services employment in total employment is helping to reduce unemployment among young persons. Furthermore, the increase in the youth inactivity rate, which is mainly due to the fact that there are more young people in education, is also linked to the overall decline in youth unemployment. Finally, as regards education, the results indicate that the number of years of education, the number of young people with vocational training and, to a lesser extent high scores in the PISA study, are associated with lower youth unemployment rates. The share of the young population not in school, however, is positively correlated with the unemployment rate. As youth unemployment is subject to certain country- specific features, each country should identify the relevant underlying sources of youth unemployment and react accordingly. Governments can make a positive contribution to the transition of young persons from education to labour market by a well-functioning education ...
JEL Code
I2 : Health, Education, and Welfare→Education and Research Institutions
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
J13 : Labor and Demographic Economics→Demographic Economics→Fertility, Family Planning, Child Care, Children, Youth
J21 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Force and Employment, Size, and Structure
J64 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Unemployment: Models, Duration, Incidence, and Job Search
25 June 2008
OCCASIONAL PAPER SERIES - No. 87
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Abstract
The aim of this report is to describe and analyse the main developments in labour supply and its determinants in the euro area, review the links between labour supply and labour market institutions, assess how well labour supply reflects the demand for labour in the euro area and identify the future challenges for policy-makers.
JEL Code
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
J1 : Labor and Demographic Economics→Demographic Economics
J2 : Labor and Demographic Economics→Demand and Supply of Labor
J6 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers
20 October 2006
OCCASIONAL PAPER SERIES - No. 53
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Abstract
This paper provides a description and a discussion of some important aspects relating to recent productivity developments in the euro area. Following decades of stronger gains in the euro area than in the US, labour productivity growth has fallen behind that in the US in recent years. This reflects a decline in average labour productivity growth observed in the euro area since the mid-1990s, which stands in sharp contrast with opposite developments in the US. The decline in labour productivity growth experienced in the euro area since the mid-1990s resulted from both lower capital deepening and lower total factor productivity growth. From a sectoral perspective, industries not producing or using intensively information and communication technology (ICT) would appear mostly responsible for the decline in average labour productivity growth since the mid-1990s. These developments were broadly experienced by most euro area countries. A comparison with developments in the US suggests that the euro area economy seems to have benefited much less from increased production and use of ICT technologies, in particular in the services sector. Diverging trends in labour productivity growth between the euro area and the US in recent years mainly reflect developments in a number of specific ICT-using services such as retail, wholesale and some financial services where strong gains were registered in the US. The evidence presented in this paper suggests that, in order to support economic growth in the euro area, emphasis should be given to both policy measures that directly address the determinants of productivity and, given the interactions among the various factors of growth, to policies that raise labour utilisation.
JEL Code
J24 : Labor and Demographic Economics→Demand and Supply of Labor→Human Capital, Skills, Occupational Choice, Labor Productivity
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
16 March 2005
WORKING PAPER SERIES - No. 454
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Abstract
This paper provides an empirical study of the determinants of female participation decisions in the European Union. The analysis is performed by estimating participation equations for different age groups (i.e. young, prime-age and older females), using annual data for a panel of 12 EU-15 countries over the period 1980-2000. Our findings show that the strictness of labour market institutions negatively affects the participation rate. Decisions linked to individual preferences with regards to education or fertility are also found relevant to participation of the youngest and prime-age females respectively. The inclusion of a proxy to capture cohort effects is crucial in order to explain the oldest females’ participation.
JEL Code
J21 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Force and Employment, Size, and Structure
17 March 2004
WORKING PAPER SERIES - No. 318
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Abstract
We examine job flows in the 1990s for a sample of 13 European countries. By using a dataset of continuing firms that covers all sectors, we find firm characteristics to be important determinants of job flows, with smaller and younger firms within services typically having a larger degree of job turnover. Once controlled for firm and sectoral effects, the role of institutions in the dynamics of job creation and destruction is examined. As expected, employment protection is found to reduce job flows. Similarly, countries with higher unemployment benefits and more coordinated wage bargaining systems are characterised by lower job flows.
JEL Code
J23 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Demand
J60 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→General
28 July 2002
OCCASIONAL PAPER SERIES - No. 4
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Abstract
This paper aims, first, at assessing the relative importance of working age population and participation rates to explain labour force developments in the euro area between 1983 and 2000. It also compares participation rates in the euro area vis-à-vis the US, considering age and gender groups. It shows that the effect of population growth on labour force developments is losing importance relative to the effects of changes in the participation rate. Indeed, in the last few years, the effects of changes in the participation rate have exceeded those of the increase in working age population. This trend is expected to continue in the coming years. As regards the comparison of the euro area with the US, it shows a continuing large difference in women’s participation rate and among the youngest and oldest men’s age groups in the US versus the euro area, giving room for future positive contributions coming from participation in the euro area.